Question

answer all of them

29. Which of the following is a real variable? 26. A lender need not be penalized by inflation if the A. prices in current dollars B. relative prices C. the price level A. long-term rate of inflation is less than the short-term rate of inflation. short-term rate of inflation is less than the B. long-term rate of inflation. the price I paid for a latte from Starbucks last week D. C. lender correctly anticipates inflation and increases the nominal interest rate accordingly. D. inflation is unanticipated by both borrower and lender. 30. Money is the most liquid asset and an excellent store of value. 27. When inflation causes relative-price the most liquid asset but an imperfect store of value. B. variability, A. demand decisions are distorted and the ability of markets to efficiently allocate factors of production is impaired. C. a very illiquid asset but an excellent store of value. D. a very illiquid asset and an imperfect store of value. B. demand decisions are distorted, but markets are still able to efficiently allocate factors of production because supply decisions are not. C. demand decisions are not distorted, but the ability of markets to efficiently allocate factors of production is impaired. 31. A checking account entry is money because it D. demand decisions are not distorted and markets are still able to efficiently allocate factors of production, regardless of what happens with supply decisions. A. is insured by the Federal Deposit Insurance Corporation. B. is a store of value. performs the functions of money C. D. can be sold for currency. 28. Governments may prefer an "inflation tax" to some other type of tax because the inflation tax A. is simpler for people to understand as compared to other taxes. 32. The amount of money reported as M2 A. is smaller than the amount reported as MI. B. reduces inflation. B. is larger than the amount reported as M1. C. excludes coins and currency D. includes bonds issued by major (Fortune 500) corporations. C. is more easier to implement. D. reduces the real cost of government expenditure.

Answer 1

26) (C) lender correctly anticipates inflation and increases the nominal interest rate accordingly

Borrowers and lenders who are anticipating higher inflation agree to a higher nominal interest rate so as to preserve the real interest rate cannot be penalized for it.